Super balances falling short of retirement goals

Australians are being urged to better engage with their super, with new research finding almost a quarter don’t have enough money in their super or other investments to get by in retirement.

A survey of over 1,000 Australians by Finder has found 23 per cent, equivalent to around 4.6 million people, admit they will have insufficient funds for a comfortable retirement. 

Just over 11 per cent said their retirement balance is too low, but they will have enough from other investments.

Some 27 per cent admitted they are not sure if they will have enough money upon leaving the workforce.  

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This research points out how millions of Australians don’t have enough in superannuation to support themselves into the future, said Finder’s money expert, Sarah Megginson.

“Superannuation is something many Australians, including the younger demographic, don’t engage in enough,” she said. 

“It can be a sad case of ‘too little too late’ for many who realise that by the time they reach retirement age, their super balance will fall well short of the amount of money they will need.”

Women were worse off (27 per cent) than their male counterparts (18 per cent) when it came to sufficient super or other investments. 

Earlier this year, Aware Super’s inaugural Hold the Door report, published in support of Equal Pay Day on 25 August, found a $93,000 deficit in women’s super balances compared to men at retirement stemming from the gender pay gap.

Vanguard also found that, regardless of their retirement status, women are displaying less engagement with their super fund and a third have never initiated contact with their fund.

Its survey over 1,800 working and retired Australians found women tend to become more engaged only as they approach retirement while men remain engaged across all life stages.

Less than half (46 per cent) of pre-retired women have initiated contact with their super fund in the last 12 months, with the figure rising to 66 per cent of female retirees, compared to 58 per cent of pre-retired men and 58 per cent of male retirees.

Finder’s Megginson highlighted numerous ways to improve engagement with one’s super fund, starting with consolidating accounts.

“First, it’s essential to know how much you have in super and to consolidate your funds. You pay fees for each fund you have – it’s like having your savings split across three savings accounts and paying account keeping fees on all of them,” Megginson said.

“It makes so much sense to bring it all together and spend less on fees, so more money stays in your name, working towards building your wealth.”

Then, she said those in a position to do so should also consider contributing to their super balance, by forgoing some of their pay through salary sacrifice. 

“Any income earned within your super is capped at a maximum tax rate of 15 per cent per annum. If you currently pay say 32.5 per cent tax, you’re ahead immediately,” Megginson noted.

“For instance, if you salary sacrifice $1,000 over 12 months, you’d pay $150 on that income and $850 will go to super where it will be invested for your future. Otherwise, you’ll pay $325 tax on that money and have $675 in your bank account.  

“Obviously once you put the money into super you can’t get it back out so start small – but even $100 a month would make a difference thanks to compounding interest.”

Finally, Megginson pointed out that consumers should also make sure their chosen super fund is offering good value for money.

She said: “Make sure you aren’t stuck in a fund charging exorbitant fees and check regularly that your employer is paying your 11 per cent per cent superannuation guarantee contributions on time.”